UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS For the years ended December 31, 2016 and 2015 and the six months ended June 30, 2017
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015 and the six months ended June 30, 2017
Further to the Form 8-K dated June 13, 2017, on March 23, 2017, New Age Beverages Corporation (“we” or the “Company”), entered into an Asset Purchase Agreement (the “Agreement”) whereby the Company acquired substantially all of the operating assets of Marley Beverage Company, LLC (“Marley”), which is a company engaged in the development, manufacturing, selling and marketing of nonalcoholic relaxation teas and sparkling waters, and ready to drink coffee drinks (the “Acquisition”). On June 13, 2017 (the “Closing Date”), the parties executed the Asset Purchase Agreement for the Acquisition.
The accompanying unaudited pro forma combined financial statements present the pro forma combined financial position and results of operations of the combined company based upon the Company’s and Xxxxxx’x historical financial statements, after giving effect to the Company’s acquisition of Xxxxxx and the adjustments described in the following footnotes, and are intended to reflect the impact of this acquisition on Xxxxxx on a pro forma basis.
The unaudited pro forma combined balance sheet as of December 31, 2016 reflect the acquisition of Xxxxxx that occurred on June 13, 2017 as if it had been consummated as of January 1, 2016 and includes historical information as reported by the separate companies as well as adjustments that give effect to events that are directly attributable to the Acquisition and that are factually supportable.
The unaudited pro forma combined statements of operations for the year ended December 31, 2016 and for the six months ended June 30, 2017 give effect to the Acquisition as if it had been consummated on January 1, 2016 and include historical information as reported by the separate companies as well as adjustments that give effect to events that are directly attributable to the Acquisition, are expected to have a continuing impact and are factually supportable.
The accompanying unaudited pro forma combined financial statements are presented for illustrative purposes only. They do not purport to represent what the Company’s combined results of operations and financial position would have been had the Acquisition actually occurred as of the dates indicated, and they do not purport to project the Company’s future consolidated results of operations or financial position. The unaudited pro forma combined statements of operations and income do not reflect any adjustments for the effect of non-recurring items that the Company may realize as a result of the Acquisition. The unaudited pro forma combined financial statements include certain reclassifications to conform the historical financial information of Xxxxxx to the presentation of the Company.
Pro forma adjustments are necessary to reflect the estimated purchase price and to reflect the amounts related to tangible and intangible assets and liabilities acquired at an amount equal to the preliminary estimate of their fair values. The pro forma adjustments reflecting the completion of the Acquisition are based upon the acquisition method of accounting in accordance with Accounting Standards Codification 805, “Business Combinations” (“ASC 805”), and the assumptions set forth in the notes to the unaudited pro forma combined financial statements. Management has made a preliminary allocation of the purchase price to the tangible and intangible assets acquired and liabilities assumed based on various preliminary estimates. The allocation of the purchase price is preliminary pending finalization of various estimates and valuation analyses.
The pro forma adjustments are based on the preliminary information available at the time of the preparation of this document.
NEW AGE BEVERAGES CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2016
| New Age Beverages Corporation |
Marley Beverage Company, LLC | Pro Forma Adjustments | Pro Forma Balance Sheet | |||||||||||||||
| ASSETS | ||||||||||||||||||
| CURRENT ASSETS: | ||||||||||||||||||
| Cash and cash equivalents | $ | 529,088 | $ | 10,124 | (A) | $ | (10,124) | $ | 529,088 | |||||||||
| Accounts receivable, net | 4,729,356 | 202,753 | - | 4,932,109 | ||||||||||||||
| Receivables from affiliates | - | 19,587,340 | (B) | (19,587,340 | ) | - | ||||||||||||
| Other receivables | - | 1,721 | - | 1,721 | ||||||||||||||
| Inventories, net | 4,420,632 | 1,834,759 | - | 6,255,391 | ||||||||||||||
| Prepaid expenses and other current assets | 326,846 | 226,801 | - | 553,647 | ||||||||||||||
| Total current assets | 10,005,922 | 21,863,498 | (19,597,464 | ) | 12,271,956 | |||||||||||||
| Property and equipment, net | 7,286,201 | 37,829 | - | 7,324,030 | ||||||||||||||
| Customer relationships, net | 4,538,674 | - | - | 4,538,674 | ||||||||||||||
| Goodwill | 4,895,241 | - | (C) | 18,505,222- | 23,400,463 | |||||||||||||
| Total assets | $ | 26,726,038 | $ | 21,901,327 | $ | (1,092,242 | ) | $ | 47,535,123 | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||||
| CURRENT LIABILITIES: | ||||||||||||||||||
| Accounts payable and accrued expenses | $ | 6,880,569 | $ | 517,480 | (D) | $ | 1,250,000 | $ | 8,648,049 | |||||||||
| Payables to affiliates | - | 46,552,602 | (B) | (46,552,602 | ) | - | ||||||||||||
| Current portion of notes payable and capital leases, net of unamortized discounts | 4,562,179 | - | - | 4,562,179 | ||||||||||||||
| Line of credit | - | - | - | - | ||||||||||||||
| Total current liabilities | 11,442,748 | 47,070,082 | (45,302,602 | ) | 13,210,228 | |||||||||||||
| Note payable and capital leases, less current portion, net of unamortized discounts | 10,374,675 | - | - | 10,374,675 | ||||||||||||||
| Loan payable to affiliate | - | 21,343,611 | (B) | (21,343,611 | ) | - | ||||||||||||
| Related party debt, net of unamortized discounts | 29,961 | - | - | 29,961 | ||||||||||||||
| Total liabilities | 21,847,384 | 68,413,693 | (66,646,213 | ) | 23,614,864 | |||||||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||||||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||||||||||||
| Common stock, $0.001 par value, 50,000,000 shares authorized; 21,900,106 shares issued and outstanding | 21,900 | - | (E) | 3,000 | 24,900 | |||||||||||||
| Series A Preferred stock, $0.001 par value: 250,000 shares authorized, 250,000 shares issued and outstanding | 250 | - | - | 250 | ||||||||||||||
| Series B Preferred stock, $0.001 par value: 300,000 shares authorized, 284,807 shares issued and outstanding | 285 | - | - | 285 | ||||||||||||||
| Class A, B,C,D, E, F and F1 units; 29,935,243 units authorized; 28,741,388 units issued and outstanding (liquidation preference of $34,332,307) | - | - | - | |||||||||||||||
| Ordinary units: 38,334,090 units authorized; 910,557 units issued and outstanding | - | - | - | |||||||||||||||
| Additional paid-in capital | 11,821,176 | 1,000,000 | (E) |
18,038,605 | 30,859,871 | |||||||||||||
| Accumulated deficit | (6,964,957 | ) | (47,512,366 | ) | (E) |
47,512,366 | (6,964,957 | ) | ||||||||||
| Total stockholders’ equity | 4,878,654 | (46,512,366 | ) | 65,553,971 | 23,920,259 | |||||||||||||
| Total liabilities and stockholders’ equity | $ | 26,726,038 | $ | 21,901,327 | $ | (1,092,242 | ) | $ | 47,535,123 | |||||||||
NEW AGE BEVERAGES CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2016
| New
Age Beverages Corporation |
Marley Beverage Company, LLC | Pro Forma Adjustments | Pro Forma Statement of Operations | |||||||||||||
| Net Revenue | $ | 25,301,806 | $ | 7,457,253 | $ | - | $ | 32,759,059 | ||||||||
| Cost of Goods Sold | 19,505,580 | 5,146,349 | - | 24,651,929 | ||||||||||||
| GROSS PROFIT | 5,796,226 | 2,310,904 | - | 8,107,130 | ||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Advertising, promotion and selling | 1,584,104 | - | - | 1,584,104 | ||||||||||||
| General and administrative | 6,367,606 | 8,077,064 | - | 14,444,670 | ||||||||||||
| Legal and professional | 1,471,273 | - | - | 1,471,273 | ||||||||||||
| Total operating expenses | 9,422,983 | 8,077,064 | - | 17,500,047 | ||||||||||||
| (LOSS) INCOME FROM OPERATIONS | (3,626,757 | ) | (5,766,160 | ) | - | (9,392,917 | ) | |||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||
| Interest expense | (299,080 | ) | (3,987,057 | ) | (F) | 3,987,057 | (299,080 | ) | ||||||||
| Other income | 292,758 | (91,837 | ) | - | 200,921 | |||||||||||
| Total other income (expense) | (6,322 | ) | (4,078,894 | ) | 3,987,057 | (98,159 | ) | |||||||||
| NET (LOSS) INCOME | $ | (3,633,079 | ) | $ | (9,845,054 | ) | $ | 3,987,057 | $ | (9,491,076 | ) | |||||
| Weighted Average Number of Common Shares Outstanding - Basic and Diluted | 18,889,608 | NA | 3,000,000 | 21,889,608 | ||||||||||||
| NET INCOME (LOSS) PER SHARE - BASIC and DILUTED | $ | (0.19 | ) | NA | NA | $ | (0.43 | ) | ||||||||
NEW AGE BEVERAGES CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2017
| New Age Beverages Corporation |
Marley Beverage Company, LLC | Pro Forma Adjustments | Pro Forma Statement of Operations | |||||||||||||
| Net Revenue | $ | 25,892,596 | $ | 1,847,473 | $ | - | $ | 27,740,069 | ||||||||
| Cost of Goods Sold | 20,066,422 | 1,509,471 | - | 21,575,893 | ||||||||||||
| GROSS PROFIT | 5,826,174 | 338,002 | - | 6,164,176 | ||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Advertising, promotion and selling | 1,591,911 | - | - | 1,591,911 | ||||||||||||
| General and administrative | 4,788,852 | 1,062,187 | - | 5,851,039 | ||||||||||||
| Legal and professional | 205,435 | - | - | 205,435 | ||||||||||||
| Total operating expenses | 6,586,198 | 1,062,187 | - | 7,648,385 | ||||||||||||
| (LOSS) INCOME FROM OPERATIONS | (760,024 | ) | (724,185 | ) | - | (1,484,209 | ) | |||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||
| Interest expense | (126,071 | ) | (1,948,586 | ) | (F) | 1,948,586 | (126,071 | ) | ||||||||
| Other income (expense), net | 2,675,423 | (547 | ) | - | 2,674,876 | ) | ||||||||||
| Total other income (expense) | 2,549,352 | (1,949,133 | ) | 1,948,586 | 2,548,805 | |||||||||||
| NET INCOME (LOSS) | $ | 1,789,328 | $ | (2,673,318 | ) | $ | 1,948,586 | $ | 1,064,596 | |||||||
| Weighted Average Number of Common | ||||||||||||||||
| Shares Outstanding – Basic | 30,540,843 | NA | - | 30,540,843 | ||||||||||||
| Weighted Average Number of Common | ||||||||||||||||
| Shares Outstanding – Diluted | 30,640,843 | NA | NA | 30,640,843 | ||||||||||||
| NET INCOME (LOSS) PER SHARE - | ||||||||||||||||
| BASIC and DILUTED | $ | 0.07 | NA | NA | $ | 0.03 | ||||||||||
New Age Beverages Corporation
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
December 31, 2016 and June 30, 2017
1. Basis of Presentation
The unaudited pro forma combined financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and certain footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been omitted pursuant to such rules and regulations; accordingly, these pro forma financial statements should be read in connection with New Age Beverages Corporation and Marley Beverage Company, LLC (“Marley”) historical audited and unaudited financial statements referred to above.
The unaudited pro forma combined statements of operations for the years ended December 31, 2016 and six months ended June 30, 2017 gives effect to the Acquisition as if it had been consummated on January 1, 2016 and include historical information as reported by the separate companies as well as adjustments that give effect to events that are directly attributable to the Acquisition, are expected to have a continuing impact and are factually supportable.
2. Acquisition of Xxxxxx
On March 23, 2017, New Age Beverages Corporation, a Washington corporation (“we” or the “Company”), entered into an Asset Purchase Agreement (the “Agreement”) whereby the Company agreed to acquire substantially all of the operating assets of Marley Beverage Company, LLC (“Marley”), which is a company engaged in the development, manufacturing, selling and marketing of nonalcoholic relaxation teas and sparkling waters, and ready to drink coffee drinks (the “Acquisition”). On March 23, 2017, the parties executed the Asset Purchase Agreement for the Acquisition, with the Closing having taken place on June 13, 2017 (the “Closing Date”). The consideration for the Acquisition was amended pursuant to an Amendment to the Asset Purchase Agreement dated June 9, 2017, which is attached as Exhibit 10.2 to this Form 8-K.
Upon the Closing Date, the Company received substantially all of the operating assets of Xxxxxx, consisting of inventory, accounts receivable, fixed assets and intellectual property in exchange for a purchase price of 3,000,000 shares of the Company’s common stock, as well as an earn out payment of $1,250,000 in cash if the gross revenues of the Marley business during any trailing twelve calendar month period after the Closing Date are equal to or greater than $15,000,000. The earnout, if applicable, will be paid as $625,000 on or before the 15th day after the end of the first trailing twelve calendar month period in which the earnout condition is satisfied, $312,500 not later than the first anniversary of the initial earnout payment, and $312,500 not later than the second anniversary of the initial earnout payment. The shares of Common Stock issued pursuant to the Acquisition have not been registered, but the holders have piggyback registration rights, as well as demand registration rights, with the demand registration rights beginning twelve months from the Closing Date. The Acquisition was subject to customary closing conditions. A copy of the Asset Purchase Agreement dated March 23, 2017 was filed as Exhibit 10.1 to the Form 8-K filed on March 29, 2017.
The foregoing description of the Acquisition and related transactions does not purport to be complete and is qualified in its entirety by reference to the complete text of the Asset Purchase Agreement and the amendment thereto and incorporated exhibits, which are filed as Exhibits 10.1 and 10.2 hereto, and which are incorporated herein by reference.
The shares of our Common Stock issued in connection with the Acquisition will not be registered under the Securities Act unless the registration rights agreement provisions are exercised, and have been issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). Certificates representing these shares will contain a legend stating the restrictions applicable to such shares.
The purchase price was allocated to the net assets acquired based on their estimated fair values as follows:
| Stock | 18,600,000 | |||
| Purchase price | $ | 18,600,000 |
| Accounts receivable | $ | 562,953 | ||
| Inventories | 798,098 | |||
| Prepaid expenses and other current assets | 198,882 | |||
| Property and equipment, net | 22,191 | |||
| Accounts payable and accrued expenses | (237,346 | ) | ||
| Contingent consideration | (1,250,000 | ) | ||
| 94,778 | ||||
| Goodwill | 18,505,222 | |||
| $ | 18,600,000 |
The above allocation is preliminary and is subject to change. The acquisition was consummated on June 13, 2017, and as such, the Company has begun to assess the fair value of the various net assets acquired, but has not yet completed this assessment. The Company is also in the process of identifying other intangible assets, such as customer relationships and recipes that may need to be recognized apart from goodwill. Once identified, these other intangible assets, if any, will be recorded at their fair values. The Company is working to finalize the allocations as quickly as possible, and anticipates that the allocation will not be final for approximately six months. Any adjustments necessary may be material to the consolidated balance sheet and the amount of goodwill recognized. Any resulting adjustments would have no impact to the June 30, 2017 reported operating results or cash flows.
In connection with the acquisition of Marley, the Company incurred minimal transactional costs, which has been recognized as expense as of the closing date.
3. Pro Forma Adjustments
The following is a summary of pro forma adjustments reflected in the unaudited pro forma condensed combined financial statements based on preliminary estimates, which may change as additional information is obtained.
Pro Forma Condensed Combined Balance Sheet Adjustments
| A. | To remove cash balances that were excluded from the acquisition of Xxxxxx. |
| B. | To eliminate related party transactions of Xxxxxx. |
| C. | To record goodwill related to the acquisition of Xxxxxx. |
| D. | To record the contingent consideration from the acquisition of Xxxxxx. |
| E. | To record the equity transactions related to the acquisition of Xxxxxx. |
Pro Forma Statement of Comprehensive Income Adjustments
| F. | To eliminate the recorded interest expense related to intercompany payable and note balances related to the acquisition of Xxxxxx. |
